WHEN the Bank of England last raised interest rates, most people had never heard of subprime mortgages; the Chinese economy was half its current size; and the iPhone was only a month old. Since July 2007 the only changes to the base rate of interest have been downward, and since March 2009 the bank has made no adjustments at all, keeping rates at 0.5% for 77 consecutive months, the longest period of stasis since the second world war (though things were even quieter in the 18th century—see chart 1). On August 6th the bank’s monetary-policy committee (MPC) voted to hold rates steady again. But with more of its members striking a hawkish tone, many pundits expect an increase by the turn of the year. What will it mean when rates rise at last?
It strikes many as odd that rates rises are on the cards. Inflation is stuck at zero, far below the bank’s target of 2%. Wages are growing faster than at any time since 2010, but it is far from certain that such...Continue reading
via Brian Rushton, The only way is up
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